Final answer:
The statement that revenues and gains increase both net income and owner's equity is true. This occurs as revenues and gains boost net income which in turn raises retained earnings, a component of owner's equity.
Step-by-step explanation:
The statement that both revenues and gains increase both net income and owner's equity is true. Revenues are the amounts earned from the sale of goods or services related to the main operations of a business. Gains, on the other hand, are other forms of income from events outside the normal operations, like the sale of an asset for more than its carrying amount.
When a company records revenue, it increases the net income on the income statement, which then increases the retained earnings on the balance sheet. Retained earnings are a part of owner's equity, thus an increase in revenues leads to an increase in owner's equity. Gains also follow this pattern; they increase net income, leading to higher retained earnings and subsequently increasing owner's equity.
Both revenues and gains are critical to a business as they both have a direct impact on the profitability and financial solidity of the company. By increasing net income, they improve the company's ability to reinvest in its operations or distribute dividends to owners or shareholders.